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18 Cards in this Set

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  • Back
Target Pay out Ratio –
the target percentage of net income paid out as cash dividends.
Optimal Dividend Policy –
the dividend policy that strikes a balance between current dividends and future growth and maximizes the firm’s stock price.
Dividend Irrelevance Theory -
The theory that a firm’s dividend policy has no effect on either its value or its cost of capital.
Bird-in-the-Hand fallacy –
MM’s name for Gordon-Lintner’s value will be maximized by setting a high dividend payout ratio.
Signal –
An action taken by management that provides clues to investors about how management views the firm’s prospects.
Information Content (Signaling) –
The theory that investors regard dividend changes as signals of management’s earnings forecasts.
Clienteless –
Different groups of stockholders that prefer different dividend payout policies.
Clientless effect –
The tendency of a firm to attract a set of investors that like its dividend policy
Residual Dividend Model –
A model in which the dividend paid is set equal to net income minus the amount of retained earnings necessary to finance the firm’s optimal capital budget.
Low-Regular-Dividend-Plus-Extras –
The policy of announcing a low regular dividend no matter what and then when times are good paying a designated “extra” dividend.
Declaration Date –
the date on which a firm’s director’s issue a statement declaring a dividend.
Holder-of-Record Date –
If the company lists the stockholder as an owner on this date, then the stockholder receives the dividend.
Ex-Dividend Date –
The date on which the right to the current dividend no longer accompanies a stock; it is usually 2 business days prior to the holder-of-record date.
Payment Date –
the date on which a firm actually mails dividend checks
Dividend Reinvestment Plan (DRIP) –
A plan that enables a stockholder to automatically reinvest dividends received back in to the stock of the paying firm.
Stock Split –
An action taken by a firm to increase the number of shares outstanding, such as doubling the number of shares outstanding by giving each stockholder two new shares for each one formerly held.
Stock Dividend –
A dividend paid in the form of additional shares of stock rather than in cash.
Stock Purchase –
A transaction in which a firm buys back shares of its own stock thereby decreasing shares outstanding, increasing EPS, and often increasing the stock price.